GDP scare

-The Hindu Business Line

Fears over shell companies inflating the GDP are overdone, but the CSO needs to be more transparent in its methods

Just as the dust was settling on the controversy over the Centre deferring the release of NSSO’s labour force survey which showed unemployment numbers in an unflattering light, a new one has broken out on the veracity of the MCA-21 database used in GDP calculations. The economic commentariat and the stock markets went into a tizzy on Wednesday after a report by the Mint newspaper revealed that the NSSO had to shelve two planned surveys on the services sector, after it found big gaps in the MCA-21 data that it sampled. Effectively, 15 per cent of the services firms from MCA-21 were not traceable, 21 per cent were ‘out of coverage’ and many others did not respond to queries. The MCA-21 database makes up the bedrock of the corporate sector Gross Value Added (GVA) estimates for GDP calculations, under the new series.

Prima facie, fears that the existence of shell companies in the MCA-21 database grossly overstates the country’s GDP seem to be overdone. The NSSO’s findings relate only to registered companies that make up less than half of the services component of the GDP.

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The Hindu Business Line, 9 May, 2019, https://www.thehindubusinessline.com/opinion/editorial/gdp-scare/article27083752.ece

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